Paradox of Twitter’s stagnant user growth and increasing revenue

Recent stepping down of Dick Costolo as CEO of Twitter and Twitter co founder Jack Dorsey being made interim CEO has again put on front Twitter’s 3 main challenges namely stagnant user growth, user retention and disappointing advertisement revenue. The micro messaging platform has been plagued by slow adoption by users and its user growth has become stagnant in recent years. Further, Twitter is getting stiff competition from its rival such as Facebook, Line, WeChat, Instagram, Snapchat and Pinterest. Twitter user growth chart, its revenue growth over the years and MAU growth chart can be seen as below:

 

1. Stalled user growth – Twitter had 302 MAUs in March 2015 and its growth has become a bit sluggish in recent quarters while its compettitor Facebook had around 1.4 billion MAUs in March 2015 and Facebook is still growing. Further, Twitter is facing stiff competition form its rival messaging and apps Facebook, Whatsapp, Line, Viber, Snapchat etc. Twitter grew from 255 MAUs in March 2014 to 302 MAUs is March 2015 while its rival Facebook increased its monthly active users from 1.276 Billion active users in March 2014 to 1.441 million active user in March 2015. Investors see MAUs as an indicator of growth and potential size of a platform and thus the lacklustre user growth despite continuous efforts from top management is a major cause of concern for Twitter.
 
2. Weak Ad Business – Ad business is continuously under pressure to sale more ads and ad sales are continuously failing to meet the forecast. Twitter’s quarterly revenue fell down from $479 million in Q4, 2014 to $436 million in Q1, 2015. The advertising revenue also fell down from $432 million USD in Q4, 2014 to $ 388 million USD in Q1, 2015. Last quarter, twitter reported weakest quarterly revenue growth and also missed revenue expectation for the market. This raises serious concern about twitter’s ability to generate revenue from sources like advertisements, data licensing etc.
 
3. Improving user experience – Twitter is said to be difficult to use for new users who are not used to short form of communication. Further, flood of content in twitter makes the platform scary for new users leading to very low retention rate. This can seen in that around 1 billion users have tried twitter sometimes but these users did not stuck around to twitter for long. Twitter needs to work on making navigation easier for new and existing users so as to provide compelling user experience to the suers. Thus, the main focus of twitter’s user acquisition strategy should be based on making easier onboarding of new users into twitter and retaining these users who are acquired.
 


Above mentioned challenges haver put immense pressure on Twitter’s product to make twitter more appealing to the users and more monetizable. This has led to accelerated pace of prodcut development in Twitter and thus Twitter has made slew of changes in its product so as to manage key challenges faced by it. Following are some of the key prodcut changes that twitter needs to include or has alsready included in its prodcut line.


1. Genre wise seperation of topic – Twitter may provide users ability to browse topic based on genre, area of interest for ex. News, Business, Sports, Tech, Music etc.


2. Save option to the user – A tweet gets lost in vast ocean of tweets and user sometimes is unbale to get back to tweet or a link he wanted to read/reply in future. User should be provided a save option to save his favourite tweets which he wants to read in future or reply back in future.

3. Search functionality – There should be a search functionality wherein a user should be able to search tweets he or she might have missed or could not have saved to be read in future. The recent twitter google deal will also help users get tweets as result in Google search result. Twitter should provide a funclitonlity to search tweets in Twitter itself instead of asking users to go to Google and search a tweet. Location based search or topic based search are other area where twitter can make search more relevant to users.
 
4. Better experience for New Users – Twitter needs to work upon making twitter better for new users who are not used to short form of communication and the flood of content that they have to face when they use twitter for first time. The main focus of twitter’s user acquisition strategy should be based on making easier onboarding of new users into twitter and providing
 
5. Easier navigation for user – Twitter needs to work on making navigation easier for new user and existing user so as to provide compelling user experience to the suers.
 
6. Video Streaming – Twitter has recently launched live streaming app Periscope in march 2015. Twitter also plans to allow users to shoot and edit videos without leaving the twitter app. It also plans to allow users group direct messages and provide new camera tools.
 
7. Online bullies and Trolls – Online trolls have long been problematic for Twitter leading to serious users leaving the platform. Twitter needs to solve this problem and simplify reporting of these bullies so that serious and loyal users do not leave the platform.
 
8. App Aggregation and monetization through services – Twitter needs to emulate business model being used by Wechat, Snapchat and Facebook wherein these apps offers some specialized apps and services to the their users. For example Snapchat offers Discover sections which consist of stories from different publishers. Similarly Facebook provides apps for messaging, consuming news and sharing photos. WeChat provides services like eCommerce, gaming, mobile payment etc. Periscope is an attempt in this line and Twitter can also follow this in order to monetize its services.
 
9. Make conversations easier to follow – Conversations around a tweet are difficult to follow especially if there are large number of replies in a tweet. Twitter is working on grouping conversations together and highlight most interesting exchange around a tweet just below the tweet.
 
10. Removal of 140 character restriction in Direct Message – Twitter has recently removed 140 character restrictions for Direct messages, which will provide much awaited solutions to users who wanted to get this restriction removed.
 
11. Revamped home page for logged out users – Twitter has revamped its home page to provide a better experience to its logged out users by allowing non logged in users to follow trending tweets. Further, Logged-out users visiting the homepage can now see a feed of tweets from several popular accounts on the topic of their choice, similar to what they’d see if they were logged-in.
 
12. Recap feature – Twitter now provides list of missed tweets to users as and when he opens the app. These missed tweets include some of the best tweets user missed from the accounts he follows while he was away from Twitter.
 
13. Partner ship with Google, Yahoo Japan and Flipboard – Twitter has announced deals with Yahoo Japan and Flipboard that will see Twitter ads start coming as “promoted tweets” pop up on Yahoo Japan and Flipboard. Further, Twitter’s recent deal with Google will start start showing for tweets into Google search results. For Twitter, there is no direct monetization involved from the deal but Twitter stands to gain in terms of increased traffic.
 
14. Highlights for users – This feature brings summary of the best tweets tailored for the user via push notification by letting him quickly catch up with what’s happening in his world.
 
Twitter’s product has been tweeking with various product features and has been conducting series of endless A/B tests but it has to be seen in future whether these product changes will lead to break any logjam in user acquisition. Further, Growing its monthly and daily active users should be only one part of twitter’s plan as Twitter needs to diversify its advertising products and find more ways to monetize syndicated content so as to increase its revenue per user also. Further, Twitter needs to start reengaging with its 1 Billion account holders who tried Twitter in past but did not stuck around with it by providing a compelling user experience to these users and existing users.
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